Is Amazon's ship sinking? International losses reach $487 million

US-based online retail giant Amazon said losses in the international business unit were $487 million in Q4, over four-fold increase from $108-million loss during the same period last yearPayal Ganguly | ET Bureau | Updated: February 03, 2017, 13:43 IST

US-based online retail giant Amazon continued to report significant losses in its international business for the quarter ended December as it continued to spend aggressively for leadership in the Indian online retail market.

The Seattle-based company said losses in the international business unit were $487 million in the fourth quarter, over four fold increase from $108-million loss during the same period last year.

Net sales for the international business went up by 18% to $13.96 billion during the fourth quarter. In the third quarter of 2016, Amazon's international unit had reported a $541 million loss primarily due to spends in India.

That was the biggest operating loss that Amazon's international business has reported in its history, according to company filings reviewed by ET.

Amazon two other business segments - retail business in North America and cloud business under Amazon Web Services - continued to post a healthy increase in profits.

Aggressive promotions and spends on developing exclusive content for its Prime service were other reasons that saw Amazon Inc’s revenue fall short of expectations. This caused Amazon’s shares to fall by 4% during the day.

During the earnings call, the company indicated that of the factors affecting the muted guidance for growth by the company include investments in India. The investments in the market “continues to be a rather large investment,” according to CFO Brian Olsavsky.

The Jeff Bezos-owned company, which operates the online marketplace Amazon.in, is estimated to have lost about Rs 900-1,000 crore to woo customers with special offers and discounts in the festive season in October. It's average losses per month are estimated to be about Rs 600 crore ($90 million), according to two sources briefed on the matter.

The other factors included Amazon Inc’s push in digital marketing, developing content for its Prime video programme, and Amazon Now and Amazon Fresh.

Amazon Seller Services, the main India unit of Amazon India received Rs 7000 crore over a 12 month period in 2016 from the parent company. Amazon India marketplace has been involved in a neck to neck competition with rival Flipkart for marketshare in the e-commerce space which saw a slow growth due to factors including shrinking discounts and demonetisation.

The company declined to comment on the impact of demonetisation on its India business.

Olsavsky called India an early market, adding that, “We are encouraged with the initial response. We have developed new functions for the country in delivery and services -- we launched Prime last summer and launched Prime video recently (as part of a global launch). We will continue to build our business there. We are bullish on India longer term.”